Financial Analysis of Malaysia - Research Paper Example

International Business Feasibility Study Financial Analysis of Malaysia The economy of Malaysia can be described as that of a Middle-income Country. The economy of Malaysia has undergone various transformations from the 70s. This has seen the country from having an economy that is known only for producing raw materials to and a fairly stable economy. Malaysia has a vision of becoming a high-income come the year 2020. The country’s target is also to improve on value-added production and to attract more Islamic investors. Their other areas of focus include biotechnology and industries with high technology. The economy of Malaysia currently relies, to a high extent on exports with exports such as oil, gas, rubber, electronic and palm oil driving the economy (Means, 1991). The country exports gas and oil and makes huge profits each time energy prices increase across the globe. Despite the fact that the country exports gas and oil, the cost of diesel and gasoline has continued to rise in the country. The government of Malaysia has also experienced strained finances forcing Kuala Lumpur to cut down on the subsidies that the government gives (Funston, 2001). The government has recently put in measures that will reduce the extent to which the economy depends on PETRONAS which is the oil producer owned by the state. The country’s dependence on gas and oil is so much that the sector accounts for more than 40 per cent of government revenue. 1. The Malaysian Banking System The central bank of Malaysia has been able to maintain reserves of foreign exchange that are healthy. Due to the fact that Malaysia has a regulatory regime that is well regulated, its exposure to financial instruments that are risky or financial crisis in the globe has been limited (Goh, 2006). Malaysia is, nevertheless, vulnerable in the event that prices of commodity fall or there is a slowdown in the global economy because a big portion of the country’s GDP is influenced by exports. Malaysia has tried to advance as an economy that is capital driven, knowledge-based, creativity and originality. Like other countries, the Malaysian economy has been affected by high interest rates in the global economy. The total number of people in Malaysia has been estimated at 27.4 million. Even though the official language spoken in Malaysia is Malay, English and Chinese are also widely spoken. The currency they use is referred to as Ringgit (RM). 2. Currency The currency used in Malaysia is the Ringgit. The currency is divided into 100 cents and is distributed by the Bank Negara Malaysia. The term Ringgit means jagged which in Malay means jagged. The Ringgit was initially used in reference to the Spanish dollars which were made of silver and had serrated edges and were widely distributed during the Portuguese colonial times. The Malaysian Ringgit is denoted using RM. Unofficially; the Ringgit is referred to as the Malaysian Dollar. 3. Accounting Practices The Accounting Practices are regulated by the Malaysian Institute of Accountants (MIA). MIA was empowered by the Accountants Act passed in 1967. MIA operates within the Ministry of Finance and is accountable to the Accountant General Office. MIA had a total of 24,719 members according to a survey done in 2008. Most of the members of MIA live in Kuala Lumpur and Selangor. The by-laws that govern the ethics & Professional conduct and the standards of auditing of the profession of accountancy in Malaysia are set by MIA. MIA also ensures that accountancy profession in Malaysia meet the standards set by the the International Auditing and Assurance Standards Board (IAASB) and International Federation of Accountants (IFAC). 4. Taxation of Business Enterprises Malaysian taxation operates in such a way that both incomes received from within and outside of Malaysia are subjected to tax. Malaysia has signed various Tax Treaties totaling to 68, the main statute being the Income Tax Act signed in 1967. The Income Tax Act is the statute that governs the way income tax is governed. As of Year of Assessment (YA) 2009, corporations are taxed at a rate of 25% while individuals are taxed at a fixed rate of 27%. As from 2004, any person who receives income from outside of Malaysia that is not from insurance, air transport or banking should be exempted from tax. 5. Foreign Trading Policies There are different ways in which foreign businesses may choose to operate in Malaysia. A foreign business may choose to register a branch office, incorporate a subsidiary which is a Malaysian company or buy a majority of shares in a company that already exists in Malaysia. The foreign company could enter into a venture with an individual who is Malaysian or with a Malaysian company. Organizational Structure El Polo Loco is a Spanish term meaning “The Crazy Chicken.” The company prides itself in going to crazy lengths to ensure that they serve the best chicken (Idrus, 2003). It is known for serving delicious chicken marinated with citrus. The company was established in Gustavo. Back in 1975 when El Polo Loco was established it was simply a chicken stand by the roadside. Soon, El Pollo Loco becomes a favorite of the locals allowing it to make huge profits. Five years later, El Pollo Loco had opened a restaurant in Los Angeles, its first restaurant in America. For a corporation like El Pollo Loco to succeed, it must adopt a particular organizational structure. The organizational structure that El Pollo Loco will choose to adopt will guide all employees on how to carry themselves around Malaysia. It will also determine the way in which work flows within the company. The organizational structure will act an outline that enables the corporation to add new branches and positions to the company. It will also give the corporation an opportunity to explore the possibilities that come with a new market. El Pollo Loco will also have to understand the business culture of the people of Malaysia. According to fatalism, success in business and failure all depend on God’s will. El Pollo Loco, being an American company, may not understand the concept of fatalism and as such may face challenges if a proper organizational structure is not put in place. In order to succeed, the management of El Pollo Loco may need to adopt a flat organizational structure (Musa, 1999). A flat organizational structure is preferable for companies venturing into a growing economy such as that of Malaysia. This is because a flat organizational structure empowers those employees in the front line to make a number of decisions independently. In a flat organizational structure, information normally flows right from the top to the bottom (Goh C. T., 1994). The employees in the front-line then communicate back to the top management. Owing to the fact that El Pollo Loco will be new in Malaysia, it may lack a strong organizational structure at the beginning. With time, however, this situation will change. At the beginning, therefore, the employees will be required to perform a number of tasks that may be outside of their job descriptions. Works Cited Funston, J. (2001). "Malaysia: Developmental State Challenged". In Government and Politics in Southeast Asia. Singapore: Institute of Southeast Asian Studies. Goh, C. T. (1994). Malaysia: Beyond Communal Politics. Pelanduk Publications, 35. Goh, M. (2006). Educationists in Malaysia concerned that NEP may cause race polarisation. Malaysia Today, 21-24. Idrus, D. (2003). New Economic Policy and the Birth of Malaysia’s Own Industrial Relations System. Jurnal Kemanusiaan , 14. Means, G. P. (1991). Malaysian Politics: The Second Generation. Oxford: Oxford University Press. Musa, M. B. (1999). The Malay Dilemma Revisited. . Kuala Lampur: Merantau Publishers. Read More